Dollar peg is dead as China vows yuan flexibility

[The Northerner]

Source: Reuters

(Reuters) - China on Saturday said it would gradually make the yuan more flexible, in a gesture that may deflect foreign criticism at next week's G20 summit, but will not quickly yield a big move by its currency.

U.S. President Barack Obama, who prodded China over the yuan in a letter released on Friday ahead of a Group of 20 meeting next week, welcomed the news -- remarks that indicate the danger of a market-roiling G20 confrontation has eased.

"China's decision to increase the flexibility of its exchange rate is a constructive step that can help safeguard the recovery and contribute to a more balanced global economy," Obama said in a statement.

Other Western leaders and the International Monetary Fund also voiced encouragement that an important strategic ally was making a concession that improves the chances for a success at the June 26-27 summit.

But the announcement by China's central bank, which strongly suggests it was ready to break the currency's 23-month-old dollar peg, was conditioned by an explicit warning ruling out a one-off revaluation or major yuan appreciation.

Read more: http://www.reuters.com/article/idUSTRE65I11B20100619

[Warpy]

1. At last!!!

Now their currency will be valued according to the balance of trade and they're going to find out what we did, that a strong currency is a detriment to the domestic workforce even as it makes offshore raw materials cheaper.

Of course, they're still trying to use slave labor conditions for their workers to continue to drive their "economic miracle," but those workers are finally starting to fight back. Strikes have occurred and they have been successful at raising wages, if not improving conditions.

The Chinese are intelligent and practical people and it's high time this happened.

[David__77]

8. Less "slave labor" conditions than in most developing countries.

In any case, this policy will lead to higher purchasing power for most Chinese.

[Alcibiades]

2. If they have decided to let the Yuan appreciate

it is because they have decided it is in their interest to do so. The success of centrally planned China in completely pwning the west at the game of capitalism should forever discredit the so-called "free-market" ideologues.

[high density]

3. Let it inflate to the stratosphere

We need to bring manufacturing back home so our own people have jobs to do.

[harry_pothead]

4. Every country should use cannabis buds as its currency

No foreign exchange rates, and money *will* start growing on trees!

[dipsydoodle]

5. Yuan alone.................

http://www.youtube.com/watch?v=TkcAa1j0CR0 :)

[Grinchie]

6. Not really sure what this means.. Can anybody explain the effects of this change?

[TomCADem]

7. China Pegging The Yuan To The Dollar Was A Huge Chinese Subsidy...

Of its exports, which also served to limit foreign access to Chinese markets.

[David__77]

9. China's decision to refocus from being so export-oriented.

There is a solid infrastructure in place in China now, and they need to begin to spur domestic demand and orient its economy accordingly. I hope it is successful. I also hope that they do not allow a true "free float" in currency. They should not allow currency speculation to undermine their growth.